District Court Stays Motion to Dismiss on Personal Jurisdiction Grounds and Orders Jurisdictional Discovery, Noting that Additional Facts About the Foreign Parent's Relationship with Its Domestic Subsidiary Could Establish Specific Jurisdiction over the Parent

The World in U.S. Courts: Fall 2015 - Personal Jurisdiction/Forum Non Conveniens

Seedman v. Cochlear Americas, U.S. District Court for the Central District of California, August 10, 2015

Seedman sued CLTD and CAM for strict liability and other claims, after a cochlear implant medical device implanted in his left ear failed. CLTD is an Australian manufacturer of implantable medical hearing devices with its principal place of business in New South Wales, Australia. CAM, a wholly-owned subsidiary of CLTD, is a Delaware corporation with its principal place of business in Colorado. CAM is registered to do business in California. CAM exclusively sells and distributes CLTD's products in the United States.    

Seedman argued that CLTD was subject to the Court's general personal jurisdiction by virtue of the conduct of its U.S. subsidiary based on an "alter ego" theory. The Court agreed that the alter ego theory may be used to extend personal jurisdiction to a foreign parent or subsidiary provided that (1) there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) failure to disregard their separate identities would result in fraud or injustice. However, the Court found that Seedman could not satisfy the "unity of interest and ownership" prong since the evidence showed that each entity "observes all of the corporate formalities necessary to maintain corporate separateness." The Court relied on the facts that CLTD does not have any offices, plants, bank accounts, employees, or corporate agents in California, does not pay California income tax, does not manufacturer, distribute, or sell any products in California, and CLTD and CAM file separate tax returns, prepare separate financial statements, and maintain separate corporate books and records as well as separate legal and administrative departments. The Court noted that corporate separateness would exist even if Seedman could show that CLTD was involved in decision-making about CAM.

Seedman argued in the alternative that CLTD was subject to the Court's specific jurisdiction because it used CAM as a distributor for its products in California and that it maintains a website that allows consumers to find California clinics that implant its devices. The Court found that the website could not serve as "minimum contacts" with California, since CLTD does not sell any products on its website and the "Find your nearest clinic" feature does not require a user to give CLTD any commercially valuable information. Regarding the distribution of CLTD products in California, the Court found that "the placement of a product into the stream of commerce, without more, is not an act purposefully directed toward a forum state." Given that CLTD does not manufacturer, market or sell products in California, and CAM markets and sells the products entirely on its own, the Court found that there was insufficient evidence to establish personal jurisdiction. However, the Court found that limited jurisdictional discovery could "yield additional facts about the relationship between CLTD and CAM, which could establish specific jurisdiction over CLTD in this case."

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